Experts predict stabilization of the air travel market

10 november 2016

In the past 2 years Russia’s air travel market has contracted dramatically and its structure has changed: a lot of passengers have switched to cheaper modes of transportation, destinations have changed and the number of trips has plummeted, the Analytical Center experts write in the “Public Demand for Air Travel” bulletin that analyses the current trends in the Russian economy.

Last year the number of airline passengers fell for the
first time since 2008 from a historic high of 93.2 million recorded in 2014 to
92.1 million in 2015. Experts say one of the reasons must have been the decline
in travel outside the former USSR, which, however, was partially compensated
for by a modest increase in domestic travel. It wasn’t just the depreciation of
the ruble, higher ticket prices and more families deciding to vacation in
Russia as a result that drove the changes in the international air travel
market. The geopolitical situation played a role as well: in Nov 2015
restrictions were imposed for Russian tourists on travel to popular vacation
destinations in Turkey and Egypt.

In 2016, airline ticket sales continued to fall in Russia:
the total number of passengers in the first 9 months of 2016 was down 7.9% on
2015, with the number of passengers travelling to destinations outside the
former USSR falling by a whopping 26.5% year on year with the total decline
over the past two years exceeding 40%.

At the same time, as the experts note, the five airlines
that have the largest amount of passenger traffic saw their ticket sales go up
by 18% in January and August 2016, as a result of an increase in the number of
transit passengers and a decrease in competition affected by fewer flights by
foreign airlines and the closure of Transaero. in the 9 months of 2016 the
total number of passengers fell by 9.8%, but if Transaero is excluded from the
2015 statistics, then 2016 can be said to have seen 11% growth in passenger
traffic. Thus, the remaining airlines have taken over more than 45% of
Transaero’s passenger traffic.

Passenger traffic increased in 2010-2014 as Russians became
more wealthy after the 2008-2009 crisis, the specialists are sure. In 2015,
airline tickets went up in price by 14%, primarily because of the depreciation
of the ruble, because airlines have to pay foreign airports in foreign
currency. At the same time, household spending on air travel fell by 12% in
2015. Euromonitor experts forecast that the trends towards lower household
spending on air travel will continue in 2016, but the rate of decrease will
slow down to 5.5%.

The decision to lift the ban on flights to Turkey and Egypt
in 2016, which are expected to resume in the spring of 2017, will help the
sector to recover, but analysts say airlines will only be able to achieve the
same sales as before the crisis in 2018-2019. Experts predict that in the fall
of 2016 airline ticket sales will continue to fall at the current rate, while
by 2017, the fall in passenger traffic should stop. At the same time, the
double-digit growth figures among the market leaders are clear evidence that
the sector is being consolidated, which may reduce competition for some
destinations.

For more, see the “Public Demand for Air Travel”
bulletin.

For other issues of our bulletin on current trends in the
global economy see Publications.